5 Ways To Out-Smart Unsecured Debt

In my experience eliminating debt for clients, I've come across five major things explode debt like a grenade going off.

The tragedy is that people could easily avoid making these five mistakes that explode into debt. Today, we'll share the five ways to out-smart your "Unsecured Debt".

Unsecured Debt is any debt that is not connected to personal property.
Unsecured Debt is mostly credit card debt.

Secured Debt has physical property that guarantees the debt. This property is known as "collateral".

Unsecured debt usually has higher fees than secured debt. In addition, with unsecured debt, there are debt triggers hidden in the contracts. These triggers are:

1. Annual Percentage Rates: Annual Percentage Rates are the amount of interest that a consumer has to pay back for a loan. There are "fixed rates" and "variable rates".

To keep your rates low, your first step should be to know what your interest rate are. More importantly, you should know how much above the "base rate" you are paying in interest.

Most people know their interest rates. But most people don't know how much above the base rate they are paying in interest. Find out how much above the base rate you are paying in interest payments.

2. Is Your Interest Rate Prime or Libor? The Prime Interest Rate is the rate set by Ben Bernanke and the Federal Reserve Bank.

Most people consider the prime rate to be the Standard Interest Rate. But there's also an Interest Rate known as the Libor Rate. LIBOR stands for "London Interbank Offered Rate". The Libor Rate is used to determine interest for card like Capital One Bank and others. Find out if your rate is Prime or Libor?

3. Keep A Careful Eye On Your Payment Due Date. Most of my clients are exceptional at paying their credit cards on time. The problem is that many unsecured loans have moving payment dates. In fact, some credit card companies are notorious for shortening the payment days in the grace period.

Some credit card companies will schedule your payment to be due during a long holiday weekend or sometimes just on the weekend. Payment due dates are often changed by the lender to force the client to pay late fees.

Creditors Want You To Become "Revolver". A Revolver is a person who fails to pay their bills on time. Being a Revolver is like holding a gun to your financial security. For this reason it's best to get a fixed payment date secured immediately.

4. Promotions Can Cause Default. Honestly there are a lot of companies that offer some great promotional A.P.R.s for enrollment into new "Loan Programs". But remember that these are Loan Programs and they are meant to be paid back - big time.

They call Loan Programs "Promotions" to make them sound sexier to you. Watch out because default could be looking sexy all dressed-up in red.

This tip goes back to the Fixed vs. Variable Rates on unsecured debt. Try to get into a low fixed rate of you're not already in one.

5. Be Better Than The Minimum Payment. Most people pay the minimum payment of 2% of their loan payment every month. But if you make an additional, regular payment of $5, you'll get out of debt a minimum of 3 times faster.


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Wishing you Financial Security!
We are Debt Warriors!